The Idaho Association of Realtors has introduced legislation, similar to measures proposed and passed in other states that have drawn fire from federal agencies, to mandate a higher level of real estate service.
Legislation proposed by the Realtor association requires real estate brokerages to be available to receive and present all offers and counteroffers to their customers, whether or not their customers want those services. The bill is opposed by at least two real estate companies that offer low-cost, reduced-service options for consumers in Idaho.
The Idaho House of Representatives last week passed House Bill 135 in a 64-0 vote, with six members absent. And the bill was introduced to the state Senate on Monday. The bill provides that real estate brokerages “have the obligation to be available to the customer to receive and timely present all written offers and counteroffers” in any compensation agreement, which targets companies that offer to list a home in a multiple listing service but provide few or no other services to consumers, for example.
“The duties … are mandatory and may not be waived or abrogated,” the proposed bill also states, and provides that brokerages may charge “a separate fee or commission for each service provided to the customer in the transaction.”
In January 2006 the Idaho Real Estate Commission considered its own draft legislation to establish new minimum standards for real estate services and requested a review by the U.S. Department of Justice, which along with the U.S. Federal Trade Commission has expressed opposition to other states’ proposed laws and regulations that would heighten the mandatory level of real estate services. Because of states’ rights to pass legislation, the federal agencies can comment about state legislation but have limited authority in taking other action against state laws, even if they are considered in violation of federal antitrust laws.
Representatives for the Justice Department met with the Idaho Real Estate Commission in January 2006 to discuss the commission’s own legislative proposal. And according to public minutes for that meeting, the Justice Department opposed the commission’s draft of the legislation “as presenting consumers from maximum choice in brokerage services. So far no complaints have been filed, either in Idaho or any state,” and, “The proposed legislation will prevent consumers from saving money should they decide to hire and pay brokers to perform only some services.”
Representatives for the Justice Department were not immediately available for comment today about the Idaho Association of Realtor’s minimum-service legislative proposal.
Several states have passed these so-called minimum-service laws despite objections by the federal agencies, while other states passed similar legislation that did not draw opposition from the agencies.
Realtor trade groups have typically endorsed and lobbied for minimum-service laws, which the Justice Department has said can be anti-consumer and anti-competitive because they can limit choice in real estate business models while potentially raising the rates charged by low-cost real estate business models.
The Idaho Real Estate Commission, a state regulatory agency, voted at its Nov. 27, 2006, meeting to support the Idaho Association of Realtors legislation.
Jeanne Jackson-Heim, executive director for the Idaho Real Estate Commission, said, “Our commissioners did review that and did vote to support that.”
Alex LaBeau, while serving as the Idaho Association of Realtors CEO last year, told Inman News last year that there is a “legal quagmire” and “significant liability issue” for buyer’s agents who work in transactions in which the seller’s agent posted a property in a multiple listing service but offered no other representation in a transaction.
“Buyer’s agents are picking up the slack and hanging their necks out there. We want to make sure that there’s a legal, level playing field for buyers and sellers, so nobody is left ultimately holding the bag.”
Jackson-Heim said she wasn’t aware whether the commission has received complaints over companies that offer limited services to clients. “We don’t keep track of complaints necessarily unless they develop into investigations,” she said.
The Idaho Association of Realtors’ new executive officer, Kevin Price, did not respond to Inman News’ requests for comment about the legislative proposal. And John Eaton, the association’s government affairs director who is listed as a contact for the legislation, also did not comment about the proposal.
In addition to mandating the presentation of offers and counteroffers, HB 135 “clarifies the difference between a customer services agreement and a representation agreement,” according to the bill text — a representation agreement is defined as “a written agreement between a buyer, seller or both and a real estate brokerage for agency representation in a regulated transaction” and “can only be made in writing,” while a customer services agreement is defined as “an agreement between a real estate brokerage and a customer for the provision of any real estate services for which the brokerage has the right to be compensated by the customer.”
Donald Plunkett, broker and president of Congress Realty, a real estate company that offers flat-fee real estate services in Idaho and other states, said he opposes the legislative proposal, which he expects will be approved. “(The National Association of Realtors) and these state associations are the most powerful lobby out there, in my opinion, and I don’t think there’s much you can do in today’s system to fight them. The best you can do is adapt to their rules. I don’t feel I can do anything at this point.”
He said he suspects that the language in the legislation will provide for a “workaround” so that his company can continue to provide MLS-listing services for a flat fee while providing the heightened level of service. The law doesn’t specify, he noted, whether real estate companies can present offers by e-mail or whether they have to present them in person.
“Whatever law they pass … there’s usually a workaround,” he said. “We’ll change our policies accordingly.” Plunkett also said that real estate customers are sophisticated and that his company makes it clear to its customers what services they will and won’t receive when they choose to do business with his company. His company offers a flat-fee MLS listing for $299 and a full-service agent support package for an additional cost of one-half percent of the home’s sale price at closing.
Most of his company’s customers, he said, “just want the MLS listing.”
The founders of Fizbomap.com, a flat-fee MLS listing service that is based in Boise, Idaho, said they also expect the Realtor association’s law to pass. Matt Newbill and Heinrich Wiebe of Fizbomap.com have expressed opposition to the proposed legislation at their blog site. Newbill stated, “I wonder if the (House) representatives fully understood the bill and its impacts on consumers. It seems like they didn’t, otherwise they probably wouldn’t have passed it.”
Wiebe said he expects the legislation will pass. He said he is “appalled” that the legislation doesn’t provide consumers with the option to waive the presentation of offers by their agent.
Newbill said the legislation doesn’t make it clear whether the presentation of offers must be in person. “They haven’t defined that,” he said. “If I have to go and explain (offers) in person that’s going to make my cost go up.”
A state legislator reportedly made a comment that consumers aren’t sophisticated enough to handle real estate transactions on their own, Newbill added. “What are they going to tell us next? We can’t sell cars on our own? (For-sale-by-owner sellers) are pretty smart. They know the process.”